Actavis, Inc.’s (ACT - Analyst Report) second quarter 2013 earnings of $2.01 per share was above the Zacks Consensus Estimate of $1.99 and up 42% from the year-ago period.
Revenues for the reported quarter came in at approximately $1,989.8 million, up 46.8% from the year-ago period, and slightly above the Zacks Consensus Estimate of $1,983 million.
Actavis operates through three segments: Actavis Pharma, Actavis Specialty Brands and Anda Distribution.
The Actavis Pharma segment posted sales of $1.6 billion, up 58%. Results benefited from the Actavis Group acquisition late last year. Moreover, revenues were driven by new product launches including the authorized generic version of Zovirax and the re-launch of the generic version of Yaz. International revenues were strong at $649.8 million, up 209%, reflecting the inclusion of legacy Actavis products. Actavis also launched its generic version of Pfizer’s (PFE - Analyst Report) Viagra in several EU countries.
Actavis Pharma revenues are continued to be expected in the range of $6.3 billion - $6.5 billion in 2013. The company was very active on the patent settlement front and signed agreements for generic versions of Ziana, Zyclara, Intuniv and the abuse deterrent version of OxyContin.
Actavis Specialty Brands revenues came in at $144.8 million, up 21%. Increased contributions from products like Rapaflo, Crinone and Generess Fe and the inclusion of Kadian revenues as a result of the Actavis acquisition aided the performance of the segment. Actavis Specialty Brands is slated to post revenues of $550 million - $600 million in 2013.
Net revenues from the Anda Distribution segment increased 14% during the quarter to $275.8 million reflecting higher chain customer sales and third party product sales. This segment consists of only third-party product sales and is expected to post revenues of $1.0 billion - $1.2 billion in 2013.
Narrows Earnings Outlook
Following the release of second quarter results, Actavis narrowed its earnings guidance for 2013 to $8.15 - $8.50 per share from the earlier guidance of $8.10 - $8.50 per share. The Zacks Consensus Estimate currently stands at $8.27 per share, within the company’s guidance range. Total revenue guidance remained unchanged at $8.1 billion.
Actavis currently carries a Zacks Rank #2 (Buy). The company is looking to acquire Warner Chilcott plc in a stock-for-stock transaction, worth about $8.5 billion, including the assumption of Warner Chilcott’s net debt of $3.4 billion.
The successful completion of this deal will lead to the creation of a leading global specialty pharmaceutical company with combined annual revenues of about $11 billion. The combined company will hold the third position in the U.S. specialty pharmaceutical market with annual revenues of about $3 billion.
We are positive on this deal which makes strategic and financial sense. The deal is expected to be immediately accretive. Moreover, it will provide strong operating cash flow and allow Actavis to de-lever its balance sheet. The tax rate will also be significantly below current levels.
Simcere Pharmaceutical Group also looks well-positioned with a Zacks Rank #2.